Italy
(Italian: Italia), officially the Italian Republic,
(Italian: Repubblica Italiana), is located on the
Italian Peninsula in Southern Europe, and on the two
largest islands in the Mediterranean Sea, Sicily and
Sardinia. Italy shares its northern Alpine boundary
with France, Switzerland, Austria and Slovenia. The
independent states of San Marino and the Vatican City
are enclaves within the Italian Peninsula, while Campione
d'Italia is an Italian exclave in Switzerland.

Italy
has been the home of many European cultures, such
as the Etruscans and the Romans, and later was the
birthplace of the movement of the Renaissance, that
began in Tuscany and spread all over Europe. Italy's
capital Rome has been the center of Western civilization,
and is the center of the Catholic Church.

Today,
Italy is a democratic republic, and a developed country
with the 7th-highest GDP, the 8th-highest Quality-of-life
index, and the 20th-highest Human Development Index
rating in the world. It is a founding member of what
is now the European Union (having signed the Treaty
of Rome in 1957), and also a member of the G8, the
Council of Europe, the Western European Union, and
the Central European Initiative. Beginning January
1, 2007, Italy became a non-permanent member of the
United Nations Security Council.

Economy

According
to GDP calculations, Italy was ranked as the seventh
largest economy in the world in 2006, behind the United
States, Japan, Germany, China, UK, and France, and
the fourth largest in Europe. According to the OECD,
in 2004 Italy was the world's sixth-largest exporter
of manufactured goods. This capitalistic economy remains
divided into a developed industrial north, dominated
by private companies, and a less developed agricultural
south. The Mafia represents the biggest segment of
the Italian economy, accounting for more than $127
billion; making organized crime 7 percent of Italy's
GDP.

Most
raw materials needed by industry and more than 75%
of energy requirements are imported. Over the past
decade, Italy has pursued a tight fiscal policy in
order to meet the requirements of the Economic and
Monetary Union and has benefited from lower interest
and inflation rates. Italy joined the Euro from its
introduction in 1999.

Italy's
economic performance has at times lagged behind that
of its EU partners, and the current government has
enacted numerous short-term reforms aimed at improving
competitiveness and long-term growth. It has moved
slowly, however, on implementing certain structural
reforms favoured by economists, such as lightening
the high tax burden and overhauling Italy's rigid
labour market and expensive pension system, because
of the economic slowdown and opposition from labour
unions.

Italy
has a smaller number of world class multinational
corporations than other economies of comparable size.
Instead, the country's main economic strength has
been its large base of small and medium size companies.
Some of these companies manufacture products that
are technologically moderately advanced and therefore
face increasing competition from China and other emerging
Asian economies which are able to undercut them on
labour costs. These Italian companies are responding
to the Asian competition by concentrating on products
with a higher technological content, while moving
lower-tech manufacturing to plants in countries where
labour is less expensive. The small average size of
Italian companies remains a limiting factor, and the
government has been working to encourage integration
and mergers and to reform the rigid regulations that
have traditionally been an obstacle to the development
of larger corporations in the country.